UK: The rise and rise of insurance fraud

Aviva confirmed this week that it had detected £110m-worth of insurance fraud in 2013 - a 19% increase on the 2012 levels.  On an average day, Aviva said it  detects 45 fraudulent claims, with a cumulative value more than £300,000. The insurance industry certainly sees this as further confirmation of an ongoing "fraud epidemic" which it has been vociferously complaining of these last five years.  Insurance fraud in the UK in 2012 was estimated to be worth up to £2 billion (a year on year increase of 23% from 2011).  Fraud is quickly jumping up the priority list and rightly so.  Although claimant groups would argue that such figures still only represent approximately 2% of claims, even they will recognise the political heat which the issue of insurance fraud is now attracting. Whether it is exaggerated home insurance claims (the highest number of fraudulent claims), dishonest motor insurance claims (the most expensive fraud to the industry) including so called "crash for cash" scams, dodgy employer liability claims or exaggerated public liability claims, the story is all the same – the seemingly relentless march of insurance fraud.  The fraudulent claim may be where there is no loss at all, where a genuine loss is fraudulently exaggerated or where a genuine claim is supported by "fraudulent means and devices". Who is to blame for all this fraud?  There is little doubt that there has been increased fraudulent activity by organized gangs but the brutal truth is that the vast majority of fraud is not carried out by burly men in black and white t-shirts running around with swag bags but by everyday consumers.  1 in 12 people have said they would be willing to take part in a "crash for cash scheme".  Staggering. The result of all this fraud is an insurance industry which is feeling vulnerable and somewhat unprotected by the law and everyday consumers seeing approximately £50 being added to their annual bills. Although there has been some lethargy from legislators, the key problem in my view is one of public perception or awareness rather than a lack of legal weaponry. If most of the fraud is being carried out by ordinary consumers then it is clear that people feel they have little or nothing to lose in submitting fraudulent claims and the "no win, no fee" culture only exacerbates this problem.  Rather than waiting for Parliament to intervene with beefed up legal remedies, the industry can implement a number of self-help measures to spread the message to consumers that (1) insurance fraud is not 'victimless' (2) fraudulent claims will be investigated and detected (3) fraudulent claims will be penalised in terms of costs, interest and contempt of court.  The insurance sector should not be waiting for legislators to intervene.  Insurers need to get the message across to the public loud and clear that there is something to lose – potentially a very great deal – in submitting a bogus or exaggerated claim. A year ago I gave a presentation on the law related to fraudulent insurance claims.

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